Chief Minister Naveen Patnaik has urged the Union Finance Minister P Chidambarm to take steps to restore the population criterion of the previous Finance Commission in the terms of reference of the 14th Finance Commission.
“If the 14th Finance Commission chooses to go by the terms of reference and takes into consideration the demographic changes that have taken place after 1971, then it is going to adversely affect the level resource transfer to 11 States which took progressive steps to arrest the rapid growth of their population,” the Chief Minister pointed out in a letter to the Union Finance Minister.
Justifying his apprehension, Patnaik said the Presidential order on January 1 last notified by the Ministry of Finance, Department of Economic Affairs on January 2 on constitution and terms of reference of the 14th Finance Commission has made a significant departure from the terms of reference of previous Finance Commissions with regard to 'population' as a criterion for determination of horizontal devolution amongst States and grant-in-aid.
Stating that population criterion is not only used for determination of inter-se share of devolution in Central Taxes, but also for computation of fiscal capacity distance as well as fiscal discipline, Patnaik said it is explicitly used for determining a State's share and is also implicitly used to scaling other parameters in determination of a State's share.
“ It has a much greater impact than what is visible and any sudden or unexpected change will impact the predictability in transfer of resources from the Centre under the aegis of the Finance Commission,” Patnaik said.
To bring his point home , Patnaik said compared to other 17 States, 11 States including Andhra Pradesh, Assam, Chhattisgarh, Goa, Himachal Pradesh, Karnataka, Kerala, Odisha, Punjab, Tamil Nadu and West Bengal, whose population registered a moderate growth since 1971 will suffer significant loss in devolution if the 2011 population is adopted by the 14th Finance Commission and subsequent Finance Commissions may also follow this precedent .
Quoting the 1977 policy statement on family welfare, he said principle of linking 8 per cent of Central Assistance to the State Plans , devolution of taxes and duties and grant in aid with their performance and success in family welfare programme used to be continued. The approach was also approved by the National Development Council in its 33rd meeting in 1979, he mentioned.
He said the National Population Policy brought out in 2000 continued the policy. The 42nd Constitutional Amendment has frozen the number of representatives in the lok Sabha (on the basis of population) at 1971 Census levels. The freeze was valid until 2001, and has served as an incentive for State Governments to fearlessly pursue the agenda for population stabilization , he said and added that the freeze was extended until 2026 in the 84th Constitutional amendment.
Pointing out that same policy was reflected in the terms of reference of the 8th and subsequent Finance Commissions, the Gadgil- Mukherjee formula and 84th amendment to the Constitution, he said it was expected that this emphasis was to continue in the terms of reference for 14th Finance Commission. “However, this balance appears to have been disturbed in the terms of teference of the 14th Finance Commission,” he said.
Stating that population enters the Finance Commission computations only in two areas, as an independent parameter and as a scaling factor, the Chief Minister apprehended that, “Even if in one of these cases the use of 1971 population is discarded, then half of its incidence is lost and it can no longer be said to be generally compliant.”